A Critical Perspective On Development Economics

Time for a Rethink on the Worth of Work

Most economists are greatly underestimating the economic challenges posed by the Covid19 pandemic. Without a correct understanding of those challenges, the aggressive monetary and fiscal measures many government are now pursuing will fall well short of their goals. They will go down in history as economic Marginot Lines—scaled up versions of tools designed to fight past crises.

The pandemic poses new and unique economic challenges. It compromises our ability to engage in productive and commercial activities requiring close contact between groups of people—that includes most of the things sustaining a modern economy. Epidemiologists tell us this is needed for several months. Responding in a way that minimises the loss of life and safeguards our long-term productive capacities requires two things: Temporarily shutting down large swaths of the economy, and focusing society’s productive resources on the kinds of work needed to fight the pandemic.

Most economists have not yet understood this partly because the scale and scope of what is needed pushes beyond the boundaries conventional economic thinking, and beyond what they generally consider to be legitimate “economic questions”.

The pandemic requires an unprecedented mobilisation of what feminist economists call care labour: work to care for ourselves, our families, and our communities. Over the next few weeks or months most people need to be focused on a vital job: caring for our collective health and helping save thousands or even millions of lives by staying at home. Many families will have to do this while simultaneously caring for millions of children now out of school, for other loved ones who cannot fully care for themselves, and for those who fall ill but do not require hospitalisation.

We need to allocate resources to enable people to perform this work.

Here we run into serious obstacles. Reflecting general social attitudes, most economists fundamentally undervalue this kind of work. It is predominantly performed by women, the poor, immigrants, and minorities. When this involves people working in their own homes, economists don’t even consider it as productive. It does not count toward GDP. When it is performed by workers in day cares, schools, hospitals, or homes, it is almost always paid very poorly. Society enjoys the fruits of this labor without giving those who perform it very much in return. The current situation offers a stark example of how society habitually takes advantage of those doing this work: the barmy demand by many employers that employees working from home while caring for young children should maintain their regular levels of productivity.

Society also grossly undervalues other kinds of work urgently needed to fight the pandemic. We are asking nurses, doctors, orderlies, janitors, grocery store workers, drivers, postal and utility workers, etc. to take on measures of personal risk no investor ever takes. Yet while grotesquely high levels of income for investors are regularly justified on the basis of the risk of asset losses they face, people performing these jobs experience very low levels of pay, precarious conditions, and weak benefit protections.

Labour markets do not generate wages reflecting the immense social value of this work. Like care work, many of these jobs are performed by women, the poor, immigrants, and minorities. Market wages and conditions reflect the precarious social positions and sometimes utter desperation of those who typically perform them. Critically important workers at Amazon and Instacart have already threatened to strike if those conditions do not improve immediately.

To enable millions of people to focus on the areas of work needed to fight this pandemic, society needs to recognise the valuable public goods that care labour creates, and to reward those performing other essential tasks in line with the social contribution their work makes.

This can be immediately pursued with measures that would also help those workers and small and medium business owners affected by the temporary shutdown of their industries: Universal monthly money transfers allowing all families to focus on the care work we need them to perform during the pandemic; statutory moratoria on regular mortgage, rent, and other debt payments households and businesses face; significant improvements in rates of pay and contractual conditions for those performing essential work outside of their homes; and ensuring the universal, public provision of social benefits like health insurance for all, and sick leave and life insurance for essential workers.

Beyond immediate measures to deal with the pandemic, the current crisis has exposed the need for a fundamental rethink of how our economies and most economists value work without which our societies could not function. Innovative economic analysis capable of addressing this problem can help societies build economies that more robust, sustainable, and equitable because they reward all work in line with the actual contributions that it makes.

Paulo dos Santos is an Assistant Professor of Economics at The New School for Social Research. He tweets at @plbds.

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The Developing Economics blog takes critical approach to development economics. It seeks to stimulate debate and critical reflection on economic development among academics and practitioners from all relevant fields.